Wayhome, the Gradual Homeownership provider, has begun buying homes after closing the initial phase of a £500m fund.
This capital, raised from pension funds, will be used to support would-be homeowners onto the property ladder.
With the first customers due to move in next month, Gradual Homeownership from Wayhome aims to help aspiring homeowners take their first steps away from renting.
Wayhome’s affordability rules mean customers could buy a home worth six to eight times their household income, as compared with 3.5 times if buying with a typical mortgage.
Wayhome customers require a deposit worth at least 5% of the purchase price, with the provider then arranging to buy the home in full, in cash, by partnering with institutional funding partners.
Customers do not need a mortgage, instead simply renting the share of the home that they don’t own at a fair market rate.
Customers can ‘staircase’ – buy more of the home – at any time, from a minimum of £50 up to 5% per year and up to a maximum stake of 40%; this staircasing is fee-free.
Customers are encouraged to choose a home which has a rental payment level which works for them, typically at less than a third of their income; this ensures they are not priced out of staircasing.
To be eligible, customers need a household income of at least £30,000, and are subject to an application process.
Wayhome searches the open market to pre-select homes that will work for the Gradual Homeownership scheme.
These are usually priced between £200,000 and £500,000, are in good structural condition with no building work needed, have between two and five bedrooms with well sized rooms, and are situated in desirable areas, not including new-builds.
Wayhome acts as a professional buyer, running the homebuying process, and handling the agents, conveyancers, and surveyors.
Their property-selection and due diligence process reduces the risk of a customer overpaying or ending up in a home where the value might be impacted by structural problems or issues in the surrounding area.
Nigel Purves, CEO of Wayhome, said: “It’s a grim reality that homeownership is out of reach for millions of people in the UK.
“Because lenders only offer loans based on low income multipliers, even those who have saved a significant deposit are often prevented from borrowing enough to buy the type of home that they can comfortably afford to rent.
“Our Gradual Homeownership scheme is a new route onto the housing ladder, one which satisfies our customers’ homeowning ambitions, while treating them fairly.
“Gradual Homeownership allows our customers to move into a bigger, better home. But it also means they can stay as long as they choose, decorate, and still share the maintenance costs fairly with our funding partners.
“More than 40,000 people who’ve registered with Wayhome already are key workers.
“We know how hard they’ve worked for us over the pandemic, yet so many of them can’t afford to buy a suitable home for themselves and their families. We’re on a mission to help change this.
“This initial launch is the first step towards a new world of possibilities for reluctant renters. There is so much more to come from us as we work to realise our mission of reinventing homeownership.”